Make Decisions with a VC Mindset - Deepstash
Make Decisions with a VC Mindset

Make Decisions with a VC Mindset

Curated from: hbr.org

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Home Runs Matter; StrikeOuts Don’t.

Home Runs Matter; StrikeOuts Don’t.

The way successful VCs make decisions is different from the way traditional corporations do: They use what we call the venture mindset. One of its hallmarks is a high level of comfort with failure. VCs expect up to 80% of their investments to fail. This is a feature—not a bug—of their business model. The investment thesis is that even if 19 of 20 start-ups fail, 1 investment will be a home run and cover the losses from all the failures combined—and then some. In other words, home runs matter; strikeouts don’t.

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Errors Of Omission Are More Damaging Than Errors Of Commission

Errors Of Omission Are More Damaging Than Errors Of Commission

VCs don’t worry about protecting capital from failures and losses. They fear missing out on an opportunity that might change the destiny of a company or an entire sector. As Alex Rampell of venture firm Andreessen Horowitz (a16z) told us, “In the VC world, errors of omission are much more damaging than errors of commission.” Bill Gurley of Benchmark Capital echoed that sentiment in a Vox interview: “If you invest in something that doesn’t work, you lose 1x your money. If you miss Google, you lose 10,000x your money,” he said. VCs don’t seek common denominators; they look for outliers.

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IDEAS CURATED BY

xarikleia

“An idea is something that won’t work unless you do.” - Thomas A. Edison

CURATOR'S NOTE

“If you invest in something that doesn’t work, you lose 1x your money. If you miss Google, you lose 10,000x your money.”

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